SEC Adm. Case No. 04-10-199 Kabalikat Civicom Assn., Inc. vs. Kabalikat Civic Communicators Network of Bicol, Inc.

Republic of the Philippines Securities and Exchange Commission

SEC B!dg. EDSA, Greenhills, Mandaluyong City

KABALIKAT CIVICOM ASSN.. INC.

-versus- Petitioner-Appellee SEC EB CASE NO. 04-10-199 (SEC CASE NO. 02-09-260) For: Change of Name KABALIKAT CIVIC CoMMuNICAtorS NetWoRK oF BICOL, INC. Respondent-Appellant.

X

DECISION

For consideration of the Commission En Banc is the appeal filed by KABALIKAT CIVIC COMMUNICATORS NETWORK OF BICOL, INC. ('respondent-appellant') praying that the Order of the Office of the General Counsel of the Commission (`SEC-OGC? dated 11 March 2010 (the "Order") in favor of KABALIKAT CIVICOM ASSN., INC ("petitioner-appeliee") which directed respondent-appeliant to change or modify its

corporate name, be reversed and set aside.

FACTS OF THE CASE

Respondent-appellant was registered on 18 May 2006 under SEC Registration

No. CN 200626769, while petitioner-appellee was registered on 28 January 1994 under SEC Registration No. AN094000339;: or, twelve years and approximately four months ahead of respondent-appellant. On 3 November 2003, petitioner-appellee's Certificate

of Registration was revoked for non-compliance with the Commission's reportorial

requirements, pursuant to the Order of Revocation dated 30 September 2003. On 31

Juty 2007 however, said Order of Revocation was set aside by the Commission.1

On 12 February 2009, petitioner-appellee filed a Petition with the Commission, to

change the corporate name of respondent-appellant, which was granted.

Hence, this appeal.

1 Order dated 31 July 2007, SEC En BancCase No. 07-07-0108.

Kabalikat Civicom Assn., Inc. vs Kabalikat Civic Communicators Network Of Bicoi, Ing Sec Eb Case No. 04-10-199 (Sec Case No. 02-09-260) Page of of Name

ISSUE

Whether the 11 March 2010 Order of the SEC-OGC ordering respondent-appellant to change or modify its name shouid be reversed and set aside.

RULING

Before the merits of the case are tackied, the procedural issues raised by both parties must be addressed.

Counsel of petitioner-appellee believes that the Appeal Memorandum filed by the respondent-appellant is in the nature of a motion for reconsideration and bereft of merit having been filed without the mandatory affidavit of merit required by Rule 37 of the Rules of Court.2 On.the other hand, Counsel of respondent - appellant correctly raised the fact that the 2006 Rules of Procedure of the Commission ("2006 Rules'), and not the Rules of Court, applies.

dismissal, based on Sec.11-6 which provides: "Dismissal of Appeal for Non-Compliance. - The appeal may be dismissed by the Commission En Banc for failure to comply with A strict application of the 2006 Rules to the instant appeal merits an outright

these Rules, or failure to perfect the appeai within the prescribed period." Respondent- appellant failed to perfect the appeal within the prescribed period of fifteen (15) days. Respondent --appellant received the Order on 24 M:arch 2010, thus the fifteenth (15th) day is 8 April 2010 for purposes of serving the Notice of Appeal and the Memorandum on Appeal upon the adverse party and filing it with the Commission En Banc. While the registry receipts for the petitioner-appellee and the Commission are dated 8 April 2010, the docket fee was paid on 12 April 2010,3 four days after the prescribed fifteen day period. Thus, respondent:appellant failed to comply with the requirements of Sec. 11-3 of the 2006 Rules on perfection of appeal 4 which is: a basis for dismissal under Sec.11- 6 of the 2006 Rules.

However, in the interest of justice and based on the principie of substantive due process, we shall give -this petition due course, inasmuch as there was partiai compliance with the 2006 Rules. Moreover, as stated in White Light Corporation et. al. vs. City Of Manila,5 "The due process guaranty serves as a protection against arbitrary

2 Comments/Opposition to Appeal Memorandum for the Respondent filed 11 May 2010, par. 2. 4 sECTION 11-3.Perfection of Appeal. -- The appeal shall be deemed perfected upon the filing of the 3 Official Receipt No. 0407631

Memorandum on Appeal and payment of the required docket fee within the period provided for in these

5 G.R. No. 122846 January 20, 2009. Ruies.

Sec Eb Case No. 04-10-199 (Sec Case No. 02-09-260) Kabalikat Civic Communicators Network Of Bicol, Inc Kabalikat Civicom Assn.,. Inc. vs

Fage har e of Nme

regulation xxx. Even corporations and partnerships are protected by the guaranty insofar as their property is concerned."

Having settled the procedural issue, we now tackle the merits.

The Order settied the issue of confusing similarity based on Section 18 of the Corporation Code.

"SECTION 18.Corporate name. --- No corporate name may be allowed by the Securities and' Exchange Commission if the

that of any existing corporation or to any other name already proposed name is identical or deceptively or confusingly similar to

protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved the Commission shall issue an amended certificate of incorporation.under the amended name."

It also applied SEC Memorandum Circular No. 14-00,7 paragraph 3 which provides, "If the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive word different from the name of the company already registered." (Emphasis supplied)

It is well settled that to fall within the protective mantle of Section 18 of the Corporation Code, two requisites must be proven:1) that the complainant corporation acquired a prior rightover the use of such corporate name; and 2) the proposed name is either: (a) identical or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law.. (Emphasis supplied)

On the first requisite of prior right, it is indisputable that petitioner-appellee acquired a prior right over the use of the corporate name, KABALIKAT CIVICOM ASSN. INC. for it was registered twelve years and four months ahead of respondent-appellant,

KABALIKAT CIVIC COMMUNICATORS NETWORK OF BICOL, INC. AIso, the petitioner

appellee is authorized by its charter to-have networks or chapters nationwide, one of

6 No person shall be deprived of life, liberty, or property without due process of iaw, nor shall any person be denied the equal protection of the laws. (1987 Constitution Art 3, Sec. 1). 7 October 24, 2000, the governing rule at the time it was incorporated. 8 Philips Export B.V., Philips Electrical Lamps, Inc. and Philips In:dustrial Development, Inc.,

vs. Court Of Appeals, Securities & Exchange Commission and Standard Philips Corporation, [G.R. No. 96161] February 21, 1992.].

Kabalikat Civicom Assn., Inc. vs. Kabatikat Civic Communicators Network Of Bicol, Inc. Sec Eb Case No. 04-10-199 (Sec Case No. 02-09-360) Page 4 of 8 For: c e of Name

which is Region V or the Bicol Region. In fact, one of the. petitioner-appellee's representatives who filed the case on its behalf is its Regional Director Rodrigo Vicaido, who "affirmed that petitioner-appellee has been operating in the Bicol Region for more

respondent-appellant. 10 than a decade prior to the filing of the complaint, which was not effectively denied by

On the second requirement of confusing similarity, jurisprudence states that in determining the existence of confusing similarity in corporate names, the test is whether the. similarity is such as to mislead a person using ordinary care and discrimination. In so doing, one must look into the record as well as the names themselves.11It is also well-settled that even without such proof of actual confusion between the two corporate names, jurisprudence states that it suffices that confusion is probable or likely to occur.12 (Emphasis supplied).

The Order compared the respondent-appellant's name, KABALIKAT CIVIC COMMUNICATORS NETWORK OF BICOL, INC. with petitioner-appellee's name, and found that respondent-appeliant's name does not contain distinctive words that differentiate it from KABALIKAT CIVICOM ASSN., INC. Thus, to the person using ordinary care and discretion,."Civic Communicators" when used alongside petitioner- appeliee's name, appears iike a mere deconstruction of the term "Civicom," and cannot serve as an effective differentiating medium. Neither can the phrase "Network of Bicol,"I function as an effective differentiating medium inasmuch as petitioner-appellee is authorized by its charter to have networks or chapters nationwide, one of which is Region V or the Bicol Region, discussed above.13 Respondent-appellant likewise admitted in its Appeal Memorandum that it uses "KABALIKAT CIVICOM" in the pursuit of its activities "or any communications."14 The foregoing discussion leads to the conclusion that the name of respondent-appellee is, indeed confusingiy similar to that of petitioner-appellant.

Additionally, the Order cited the fact that the two organizations have similar

purposes, as stated in their respective Articles of Incorporation.1s Succinctly, both civic

11 Red Line Transportation Co. vs. Rural Transit Co., September 6, 1934, 60 Phil 549 cited 10 Order dated 11 March 2010, p. 5.

in Philips Export B.V.; Philips Electrical Lamps, Inc. and Phitips Industrial Development, Inc.. petitioners, vs. Court Of Appeals, Securities & Exchange Commission and Standard Philips Corporation, respondents. [G.R. No. 96161.] February 21, 1992],citing Ohio Nat. Life Ins. Co. v.

12 Industrial Refractories Corporation of the Philippines vs. Court of Appeals, et al. G.R. No. 122174 Ohio Life Ins. Co., 210 NE 2d 298.

October 3, 2002. citing Philips Export B.V. vs. Court of Appeals, 206 SCRA 464, citing 6 Fletcher

14 That is why, in its original petition, petitioner-appellee prayed that respondent- appellant cease and 13 Order dated 11 March 2010, pp. 4-5. [Perm Ed], pp. 107-108.

desist from using "Kabalikat Civicom" Appeal Memorandum, par. 3. 15 Id., p. 6.

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Page 5 of 8 For: Change of Name

organizations render public assistance through the use of radio communications,16 which could easily give rise to confusion. It cannot be ignored that the likelihood of confusion arising from the similarity of the names of the parties herein is most likely to arise because the incorporators of respondent-appellant were former members of petitioner-appellee.17

A glaring example of the fact that the names of the parties herein are deceptive/y or confusingly similar, is that both parties claim that they won the Kalasag Award given by the Philippine National Police (`PNP") to outstanding civic organizations who have been a partner of the PNp in its service to the community. According to petitioner appellee, this award was given to their organization, but was ciaimed by respondent- appellant's President. The petitioner- appellee alleqed that it was disclosed to them later, that the award was given not knowing that there are two claimants of the name "Kabalikat Civicorm."18 On the other hand, respondent-appellant alleged that there was no confusion and that they deserved the award.19

As enunciated in Philips Export B.V. Court of Appeals20 the subsequent appropriator of the name or one confusingly similar thereto such as the respondent- appellant herein, usually seeks an unfair advantage, a free ride on another's goodwi.21

The Order clarified that SEC Memorandum Circular No. 14-00 paragraph 322 applies only if the word used or registered as part of a corporate name is a generic or common name. It does not apply if the word is a valid trademark or trade name of another person or entity, or is a dominant word or feature of a previousty used or registered corporate name.23

In its Appeal Memorandum, respondent-appellant basically reiterated its position that "Kabalikat". is a generic term incapable of appropriation. It likewise made a sweeping statement that "Al! the cases cited are not applicabie to the case at bar." 24

16 Reply Memorandum for the Petioner- Appellee dated 29 May 2010 par.5 p.3. 17 Order dated 11 March 2010, pp. 5-6. 18 Comments/Opposition (to Appeal Memorandum for Responder:t dated Aprit 29, 2010 par. 6 and Reply

19 Repiy dated 12 May 2010 par. 10. 20 G. R. No. 96161, 21 February 1992; 206 SCRA 465-466. 21 Id., Philips Export, citing American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al., Memorandum for the Petitioner-Appellee dated 29 May 2010 par. 7.

22 Which provides, "If the proposed name is similar to the name of a registered firm, the proposed name 89 App DC 269, 191 F 2d 488.

must contain at least one distinctive word different from the name of the company atready registered." 23 Citing R. Agpalo, The Law on Trademark, Infringement and Unfair Competition 110 (2000) citing

Lyceum of the Philippines, Inc. vs. CA 219 SCRA and Philips Export B.V. vs. CA 206 SCRA 458. 24 See Assignment of errors and par. 35.

Kabatikat Civicom Assn., Inc. vs Kabalikat Civic Communicators Network Of Bicol, Inc Sec Eb Case No. 04-10-199 (Sec Case No. 02-09-260)

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However, adhering to landmark cases on the subject, the Order fittingly resolved that it is not generic. That is, those which constitute "the common descriptive name of an article or substance," or comprise the "genus of which the particular product is a Species,", or are "commonly used as the name or description of a kind Of goods." zs (Emphasis supplied).The Order articulated that it is not generic for it does not particularly refer to the basic nature of the services provided by petitioner-appellee. Unlike the case of Lyceum vs. Court of Appeals 2e 6 where "Lyceum" was shown to be ciearly descriptive of the very being of an 'educationai institution, the term "Kabalikat,1 is under the circumstances, no generic and descriptive of the petitioner-appellee.27 Indeed, "Kabalikat" does not readily convey the fact that petitioner-appellee is engaged in public assistance through the use of radio communications. The Order is right in stating that "xxx it merely gives a hint, and requires imagination, thought and perception to reach a conclusion as to the nature of such services."'2

To bolster its position, respondent-appellant attached a copy of the Commission's Administration Portai29 showing the name of several corporations using the word "Kabalikat."30 Indeed, "Kabalikat" is used by several other corporations, but they are in other lines of business, such as Kabalikat Agri-Aqua Livelihood Asociation, Kabalikat Garments, and Kabalikat Gun Club Inc. which are hardly deceptively or confusingly similarwith that of petitioner-appellee.

According to petitioner-appellee, it has not filed any opposition or petition against any of those other organizations using "Kabalikat" or "Kabalikat Civicom" because: First, some of them were able to register by virtue of a certification of no opposition or an express permission from the petitioner-appellee, inasmuch as they are accredited chapters or branches of petitioner-appellee. This satisfies the requisite of SEC Memorandum Circular No. 14-00, paragraph 10 which provides:

"The name which contains a word identical to a word in a registered name shall not be allowed if such word is coined or already appropriated by a registered firm, regardless of the number of the different words in the proposed name, unless there is consent from the registered firm or this firm is one of the stockholders or partners:of the entity.to be registered." (Emphasis supplied)

25 Societe Des Produits Nestle, S.A. and Nestle Phitippines, Inc. vs. Court of Appeals and CFC Corporation

G.R. No. 112012, April 4, 2001 Citing Federal Unfair Competition: Lanham Act S 43(a), p. 3-22.1.

3o Appeal Memorandum for the Respondent - appellant Annex "2." 26 G.R. No. 101897: March 5, 1993. 27 Order dated 11 March 2010 p. 4. 29 Accessed 9 June 2009. 28 Id., p.4.

Kabalikat Civic Communicators Network Of Bicol, Inc. Kabalikat Civicom Assn., Inc. vs.

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Second, other organizations listed with the word "Kabalikat" are engaged in business other than that of petitioner-appellee's which is civic work using radio communications. Third, others.have not been cited in the original petition because petitioner-appellee may not have heard of'their existerce or has not vet been a victim of confusion with such entity.31

Reliance of respondent-appellant on the case of Columbia Mill Co. vs. A/com (sic)32 150 US 460 in claiming that "Kabalikat" is generic and incapable of appropriation, name,33 unlike "Kabalikat" which is not. In fact, the case strengthens the position of the is mispiaced since the case refers to the appropriation of "Columbia" a geographid

trademark is founded on the priority of appropriation.34 The principles of trademark law are adopted in resolving the case at bar inasmuch as the application of trademark has petitioner-appellee for it affirms the principle that the exclusive right to the use of a

been extended to corporate names. The right to use a corporate name to the exclusion of all others is based upon the same principie, which underlies the right to use a particular trademark or trade name.35

WHEREFORE, premises considered, the Order of the SEC-OGC dated 11 March 2010 in SEC Case No. 02-09-260 directing KABALIKAT CIVIC COMMUNICATORS NETWORK OF BICOL, INC. to change or modify its name is hereby AFFIRMED, and the present appeai is hereby DENIED.

SO ORdERED.

Mandaluyong City, 15 July 2010.

Fe B. BarIN

Chairperson

Ma. Juanita e. cuet Commissioner RAUL J. PALABRICA Commissioner

31 Comments/Opposition dated 29 April 2010 par.4. 32 Should be, Columbia Mill Co. vs. Alcorn 150 US 460 (1893). 33 "xxx the word "Columbia" is not subject of exclusive appropriation, under the general rule that the word or words, in common use as designating a locality, or section of a country, cannot be appropriated

35 Hector S. De Leon & Hector M. De Leon, Jr. Corporation Code of the Philippines Annotated pp.184- by any one as his exclusive trademark." Id., par.9. Id., see paragraphs 5 & 6.

185. (9th ed. 2006).

Kabalikat Civicom Assn., Inc. ys. - Kabalikat Civic Communicators Network Of Bicol, Inc. Sec Eb Case No. 04-10-199 (Sec Case No. 02-09-260) For: Change of Name Page 8 of 8

MAnuEL HUBERTO B. GAITE EladiO m. Jala N

Commissioner gmmistioner

*on official business